When most people think about Social Security, they naturally think of retirement benefits. But about 1/5 of all Social Security benefits are spousal or survivor benefits, therefore when you're planning for retirement, it is critical to consider the fact that you or your spouse might get Social Security survivor benefits or spousal benefits at some points in their life.
In this article, we're gonna discuss the fundamentals of Social Security spousal benefits.
Generally, a married person can get a spousal benefit equal to half of her husband's basic benefit, also labeled the PIA (primary insurance amount).
Social Security spouse benefits usually come into play when one spouse takes time away from work to raise a family, and thus has very little or no earnings.
Calculating the Spousal Benefit:
The spousal benefit is in fact a combination of both spouses' benefits. If a married person has sufficient credits to qualify for Social Security on her own, then her credit will be figured first. If it is less than her spouse's benefit, she will receive her benefit together with an adjustment to equal half of her husband's primary benefit.
When you should Start the Spousal Benefit:
You could apply for the spousal benefit as early as at the age of 62, as long as the working or higher earning spouse is eligible and has applied for benefits.
It does not good for the lower earning spouse to wait beyond her complete retirement age to apply for spousal benefits because the spousal benefit will not earn credits beyond the complete retirement age. So, spouses applying for the spousal benefit should do so when they reach complete retirement age.
How Early Retirement Affects The Spouse Benefit:
Spouses who apply for the spousal benefit before she is complete retirement age will get a reduced benefit just like she would if she applied for her own Social Security benefit before full retirement age. This reduced benefit is permanent, even though she takes her spousal benefit at the age of 62 and switches to her own benefit at full retirement age.
Some other Issues:
Individuals who begin collecting retirement benefits before complete retirement age can only earn up to a certain amount before they've to pay back part or all of their Social Security benefits. In '09, that amount is $14,160. If you earn more than $14,160, you require to pay back $1 for each $2 you earned over the limit.
This earnings test applies to spousal and survivor benefits along with retirement benefits, so if you expect to work before you reach complete retirement age, you should delay your retirement and spousal benefits.
In this article, I have referred to the wife as the lower earning spouse out of convenience. But, in today's world, it's not uncommon for the wife to be the higher earning spouse. The great news is that Social Security is gender neutral, therefore the Social Security spouse benefits can apply to the wife or husband, in addition to the higher or lower earning spouse.
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